The Securities and Exchange Board of India on Friday climbed down on its trading ban order against Indiabulls Securities in the IPO scam until further directions, hours after it had banned the company and several other market intermediaries yesterday.

SEBI today said, "the ex parte ad-interim order dated April 27 in the matter of initial public offering, in so far as it relates to Indiabulls Securities would be kept in abeyance subject to verification of clients and until further directions."

The order was put on hold after Indiabulls contested it. Top officials of Indiabulls Securities including its Chairman, Mr Sameer Ghelaut, met the SEBI Whole-Time Member, Mr G. Anantharaman, who issued the order yesterday.

Company's submission

The reversal of the trading ban on Indiabulls comes "on the basis of oral and written submissions" made by Mr Ghelaut, SEBI said.

Shares of Indiabulls, which hit the 20 per cent-permitted lower circuit at Rs 248.80 immediately after the market opened, recovered later to end at Rs 282.50 - down 9.15 per cent from Thursday's Rs 310.95.

In a notice to the BSE, Indiabulls said it made submissions regarding the receipt of 13,939 shares of TCS after its IPO from 559 different accounts.

These account holders transferred TCS shares to Indiabulls Securities' client margin account for their trading purposes for meeting their margin requirements as per the stock exchange rules and regulations.

"Indiabulls Securities accepted these shares in its capacity as a broker for the limited purpose of facilitating the client transactions. As per the rules, a broker cannot trade on behalf of a client without receiving margin from the client either in the form of cash or shares," it said. On the sales of the TCS shares, the company said the proceeds of the sales were transferred by Indiabulls Securities to the same individual client accounts who had transferred these shares to Indiabulls client margin account for meeting margin requirements.

Indiabulls Financial Services said Indiabulls Securities Ltd or any of its group companies had absolutely no role in either the IPO application of these clients or any economic interest or any other interest whatsoever in the sale proceeds arising out of the sale of 13,939 shares or any financing of any of the IPO applications of the clients. These clients are based out of 81 different cities in India.

SEBI clarifications

The capital market regulator came out with a clarification in the morning that all the clients of the market intermediaries named in IPO scam can continue to transact business with these companies or entities. The ban of dealings will be applicable only in respect to proprietary account of brokers. "The transactions on behalf of clients would remain unaffected," the clarifications issued on Friday morning said.

SEBI also clarified that the same was applicable in respect to DP operations wherever they are Depository Participants.

On DP transactions through Karvy DP and Pratik DP, which were banned from dealings in the securities market, SEBI asked the clients to switchover to another DP within 15 days.

"It is clarified that the DP transactions of clients would remain unaffected only for 15 days, by which time switchover to another DP should take place in respect of directions against Karvy DP and Pratik DP," a SEBI press release said.

RPL IPO allotments

SEBI also clarified that the allotments of the Reliance Petroleum Ltd's (RPL) just-concluded IPO will continue unaffected. Karvy was the registrar for the RPL issue.

"SEBI order restrains the companies from taking up fresh businesses. The RPL allotments will continue," said a SEBI official.

(This article was published in the Business Line print edition dated April 29, 2006)

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